Growth holds firm across sectors, policy stays data-driven
India’s economy continues to show resilience amid heightened global volatility, according to the Reserve Bank of India’s latest monthly bulletin published Wednesday. The central bank said key industrial and service sector indicators for May point to strong domestic momentum, despite global uncertainty triggered by trade and geopolitical tensions.
The RBI recently delivered a surprise 50 basis point cut to its key interest rate and lowered banks’ reserve ratio, citing subdued inflation and the need to stimulate growth. In its State of the Economy article, the RBI said financial conditions are “conducive” for credit transmission following the policy easing.
Inflation dips, agriculture rebounds
India’s headline retail inflation dropped to 2.82% in May — the lowest level in over six years — down from 3.16% in April. This marks the fourth consecutive month that inflation has stayed below the RBI’s 4% target, giving policymakers room to shift their focus toward growth.
The central bank also noted a broad-based increase in agricultural output during the 2024–25 crop year, further contributing to domestic price stability. “The domestic prices situation remains benign,” the bulletin stated.
Policy path hinges on trade, geopolitics
Looking ahead, the RBI said upcoming trade policy decisions in July, once a temporary tariff pause expires, as well as the evolving geopolitical landscape, will significantly influence India’s medium-term economic outlook.
“Going forward,” the RBI bulletin said, “the MPC will remain data-dependent to chart the future course of monetary policy and strike the appropriate growth-inflation balance.”
While India is navigating external pressures with relative strength, the central bank made clear that its monetary stance will be guided by incoming economic data, including inflation and trade dynamics, rather than committing to a fixed path of rate cuts.
